Association for Public Policy Analysis & Management

Local infrastructure assets, including the city roads we take to the grocery store, the nearby municipal sanitation plant, and the new mixed-use development down the street, are essential for any city. Despite the importance of local infrastructure assets, there has been waning financial support for constructing new assets and maintaining existing ones primarily because these assets are capital intensive, geographic in nature, and have a long lifecycle. As urbanization trends continue to put more stress on cities and their expansive and intricate real asset networks, it will be essential that local governments identify and unlock new sources of financing and funding to ensure to ensure that these projects are constructed, and then maintained, at an adequate level. In recent years, lack of investment in real assets has led to inefficiencies and public health crises. As a result, the American Society of Civil Engineers identified a $1 trillion infrastructure investment gap within the United States.

While larger infrastructure assets have benefitted from private sector partnerships, local infrastructure assets continue to be underfunded and mismanaged. Specifically, local infrastructure assets face demand and public opposition risk to a much higher degree than their large real asset counterparts that can jeopardize the successful construction and operations of these assets and therefore prove to be a barrier for private investment. Recently, a new two-sided marketplace, facilitated by crowdfunding platforms and the 2012 passage of the JOBS Act, has been working to identify these risks by allowing nontraditional investors, community members, to support projects by investing in and donating to specific local infrastructure assets. Crowdfunding local infrastructure assets allows community members to show not only financial support, but also social support, for specific projects and may prove useful for local governments who are hoping to fund and also prioritize infrastructure construction and maintenance.

In conversation with crowdfunding platforms that focus on local infrastructure asset investments, we explore how this new two-sided marketplace is being created, growing, and working with local governments to deliver much needed local infrastructure assets. As a result of using new practices and strategies to raise funds and financing for these assets, we find that these crowdfunding platforms are identifying, mitigating, and reducing asset risks. Similar to private sector partners who engage in public-private partnerships for delivering larger infrastructure assets, partners involved in crowdfunding local infrastructure assets provide project specific expertise. Yet, unlike traditional private sector partners, these partners are able to engage with communities in new ways that yield greater insights into asset demand, maintenance, and design. This initial research, helps us to understand how these crowdfunding platforms can improve their ability to partner with local governments and increase the financial support for the assets that we take for granted every day.